China's restaurants, and upscale restaurants in particular, should shift their focus to the mass market in the wake of a central government crackdown on extravagant dining with public money over the past few months, experts said Thursday.
A report from the China Cuisine Association showed Wednesday that sales revenues of some high-end restaurants, whose income in the past came largely from official and business banquets, declined over 50 percent in February.
Data from the National Bureau of Statistics showed that China's catering business reported a sales growth of 8.4 percent in the first two months, 4.9 percentage points lower than the same period in 2012. Growth of high-end restaurants - with annual sales of over 2 million yuan ($322,800) - dropped 3.3 percent year-on-year.
"Restaurants should focus more on the needs of the general public in the future. Growth of an industry should not rely on extravagant consumption," Feng Enyuan, secretary-general of the China Cuisine Association, told the Global Times Thursday.
Liu Hui, an industry analyst at Capital Securities, said that due to the central government's call in December to curb extravagance, many companies' annual celebrations were called off, which dealt a major blow to China's catering business earlier this year.
Besides the government's austerity campaign, the H7N9 bird flu currently affecting some coastal provinces has also cast a shadow over the catering sector.
Beijing Xiangeqing Group, a high-end restaurant chain operator, recently announced that it would stop serving poultry dishes as some consumers feel reluctant to eat poultry.
In an earnings forecast report on March 30, Shenzhen-listed Xiangeqing said that it expects to suffer losses of up to 70 million yuan due to unfavorable market conditions, compared with a profit of 46.23 million yuan in the first quarter of 2012.
Shares of Shenzhen-listed China Quanjude Group, which is famed for its Peking roast duck, have tumbled over 7 percent amid the H7N9 fears.
And Yum! Brands, the parent company of KFC, said Thursday that its China sales in March had dropped 13 percent year-on-year.
But Liu from Capital Securities said that as long as the bird flu scare does not get any worse, its impact on the catering sector will quickly fade.
Experts noted that the previously inflated gross profit margins in the catering sector as well as the high-end liquor industry will drop to reasonable levels as the government's curbs gradually show effect.
"Upscale restaurants may still guarantee the development of sales revenue by turning to the public market, but the gross profit margins will surely get thinner," Liu said, and noted that this means these industries will fall to more reasonable growth in the future.